Correlation Between Ultrashort Small-cap and Harding Loevner

Can any of the company-specific risk be diversified away by investing in both Ultrashort Small-cap and Harding Loevner at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ultrashort Small-cap and Harding Loevner into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultrashort Small Cap Profund and Harding Loevner Global, you can compare the effects of market volatilities on Ultrashort Small-cap and Harding Loevner and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ultrashort Small-cap with a short position of Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrashort Small-cap and Harding Loevner.

Diversification Opportunities for Ultrashort Small-cap and Harding Loevner

-0.51

Correlation Coefficient

Ultrashort Small-cap  Harding Loevner

Excellent diversification

The 3 months correlation between Ultrashort and Harding is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ultrashort Small Cap Profund and Harding Loevner Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Global and Ultrashort Small-cap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ultrashort Small Cap Profund are associated (or correlated) with Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Global has no effect on the direction of Ultrashort Small-cap i.e., Ultrashort Small-cap and Harding Loevner go up and down completely randomly.

Pair Corralation between Ultrashort Small-cap and Harding Loevner

Assuming the 90 days horizon Ultrashort Small Cap Profund is expected to generate 0.87 times more return on investment than Harding Loevner. However, Ultrashort Small Cap Profund is 1.14 times less risky than Harding Loevner. It trades about -0.04 of its potential returns per unit of risk. Harding Loevner Global is currently generating about -0.1 per unit of risk. If you would invest  4,319  in Ultrashort Small Cap Profund on October 25, 2024 and sell it today you would lose (403.00) from holding Ultrashort Small Cap Profund or give up 9.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ultrashort Small Cap Profund  vs.  Harding Loevner Global

Ultrashort Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Small Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Harding Loevner Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harding Loevner Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ultrashort Small-cap and Harding Loevner

The main advantage of trading using opposite Ultrashort Small-cap and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrashort Small-cap position performs unexpectedly, Harding Loevner can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Harding Loevner will offset losses from the drop in Harding Loevner's long position.

The idea behind Ultrashort Small Cap Profund and Harding Loevner Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..